ENGIE Transparency register: 90947457424-20
ENGIE Response to the consultation on the Roadmap /
Inception Impact Assessment on the
“Hydrogen and Gas Markets Decarbonization Package”
10 March 2021
ENGIE supports Europe’s ambitious objectives to become the first carbon-neutral continent by 2050 and
– as an important milestone on the pathway to 2050 – achieve a reduction of greenhouse gas emissions
of at least 55% by 2030. We welcome the recognition of the role that gaseous energy carriers will play
alongside energy efficiency, electrification, district heating and cooling, etc. in an integrated and
increasingly decarbonized energy system, as expressed in the
Energy System Integration and Hydrogen
Strategies1. Indeed, natural gas can help to achieve quick wins for the climate by replacing more carbon-
intensive energy carriers like lignite, coal and oil products in the years to come. Advancing further on the
way towards carbon-neutrality, natural gas has to be replaced progressively by renewable and low-carbon
gases. Gases will (continue to) provide back-up and storage capacities in the power sector to integrate
wind and solar and help to decarbonize heating and cooling, industry and transport, thus complementing
electricity-based and other solutions in these sectors.
A fully-fledged “Gas and Hydrogen Decarbonization Package” is key to make this happen and has to be
designed in a coherent and complementary way with other relevant legislation, notably the Renewable
Energy Directive (RED). We appreciate the stance taken in the Inception Impact Assessment / Roadmap
document intending to enable a variety of solutions, acknowledging that “the reform should enable fair
competition between smart electrification, energy efficiency, and renewable and low-carbon gases like
hydrogen and bio-methane, or CCUS technologies in achieving decarbonization targets.” Indeed European
and national policy-makers and regulators should start addressing the challenges related to sector
coupling/integration and the development of hydrogen and other renewable and low-carbon gases as
soon as possible, investigating also the production and market potential of CCUS in order to enable the
huge energy, industrial and service transformation that is needed and will depend on a global and
cooperative vision and a favorable and clear legislative framework to be successful.
Scope of the Gas and Hydrogen Decarbonization Package
The scope as indicated in the IIA / roadmap document seems to put a strong focus on infrastructure
questions. While fully recognizing their importance, we consider that the
Gas and Hydrogen
Decarbonization Package should also complement the RED in supporting investment in renewable and
low-carbon gases and in creating markets for these gases. While the EU ETS is an important tool to drive
decarbonization solutions, we cannot wait until carbon price signals are high enough and available in all
relevant sectors to deliver adequate investment incentives.
EU legislation should provide a legal basis for
1 EU Strategy for Energy System Integration COM(2020) 299 final (July 2020) and
EU Strategy on Hydrogen
COM(2020) 301 final (July 2020)
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targeted financial support, adapted to the needs of each technology, including measures to support the
production as wel as the demand for such gases.
Definitions and certification of different renewable and low-carbon gases are the basis on which market
arrangements and support schemes can be developed.
A clear and practicable terminology is therefore
urgently needed. The carbon footprint is a key criterion to determine the decarbonization contribution
and should be established on a life cycle basis. Moreover, a distinction should be made between renewable
and non-renewable gases. Further overly restrictive criteria which risk to make renewable and low-carbon
gas projects unnecessarily expensive and complex (as for instance currently discussed for renewable
hydrogen in the context of a delegated act under the RED concerning additionality, temporal and
geographical correlation) should be avoided. Indeed overly restrictive criteria would be counter-
productive as they will limit renewable and low-carbon gas volumes and therefore slow down the pace of
the energy transition.
Guarantees of Origin (GOs) should be issued for renewable and low-carbon gases in a standardized way
while providing information on whether the gas is renewable or low-carbon and on the different
production ways, in order to design a pan-European market for all types of GOs. GOs are the instrument
to “implement” the terminology, creating transparency, serving as proof and allowing tradability based on
a book & claim approach. This includes both gases that are injected in networks or not: For instance, in
case of liquefied renewable methane, logistics optimization will require the usage of small-scale LNG
infrastructure where a book & claim system (including to demonstrate sustainability) is the only practical
solution. Creating a pan-European market for GOs also requires that these GOs are fully recognized in end-
users mechanisms such as the EU ETS, energy taxation, but also sectoral CO2 emissions regulations, the
future Fuel EU maritime regulation, etc.
Integration of renewable and low-carbon gases in existing gas infrastructure
Renewable and low-carbon gases will play a crucial role to integrate variable renewable electricity in the
system (e.g. through P2G, hybrid heating solutions, by fueling gas-fired power plants as the most
economical way to manage intermittency, …). Moreover, they complement electrification in decarbonizing
heating & cooling, transport and industry, where renewable and low-carbon gases are often an
appropriate and cost-effective and – for some applications – even the only available decarbonization
solution, according to the current state of technology.
Making optimal use of existing gas infrastructure
(network, storage, LNG terminals) to transport and store renewable and low-carbon gases can partly
relieve the investment pressure on the electricity side and contributes to an overall system cost-
efficiency. This should be recognized when assessing the support given to renewable and low-carbon
gases: A fair comparison of all renewable and low-carbon energy vectors should take into account that
renewable and low-carbon gases coupled with gas infrastructures can provide additional flexibility services
and can help to limit peak electricity needs.
An important
advantage of renewable methane (biomethane, synthetic methane, etc.) is the possibility
to inject it in the gas grid and use it directly in existing applications (such as CCGTs, gas boilers, CNG and
LNG vehicles) without the need of adaptations or changing end users’ equipment. As such gases are often
injected on distribution level (close to the production sites, mostly in rural areas), certain infrastructure
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adaptation investments to accommodate all the renewable gas production could be necessary (e.g.
reverse flow mechanisms to send renewable gases towards higher pressure grids, interconnection of grid
sections, …). Such network adaptation costs are part of the evolution of the infrastructure to a more
decentralized and sustainable model, facilitating renewable gas projects and thus accelerating
decarbonization. They should be recognized as such in the regulation of infrastructure operators and
financed, for instance, through tariffs. Moreover, Member States should be allowed to devise regulatory
solutions that facilitate biomethane development including through the possibility to socialize connection
costs of biomethane plants in gas infrastructure tariffs, subject to technical-economic criteria. The French
system of connection and network integration of biomethane installations is an appropriate example.
When it comes to hydrogen, blending can be an interesting transitional option to provide flexibility to
project developers allowing them to inject H2 volumes in gas (methane) grids. This can be relevant for
instance while local / pure H2 demand still has to develop or to valorize volumes that exceed the local H2
demand. However, blending faces certain limits, both in terms of economic considerations (higher value
of “pure” hydrogen) and technical nature (either related to infrastructure or the sensibility of some end-
user equipment to gas quality and fluctuations thereof), so that dedicated hydrogen infrastructure will be
required to accommodate increasing volumes of hydrogen. The planning and coordination of repurposing
existing gas pipelines and building new hydrogen infrastructure should start already now with a holistic
and collaborative approach associating gas and power TSOs/DSOs/SSOs, network users/shippers, LSOs and
regulators.
The
development of smart gas grids is essential to enable a progressive substitution of natural gas by
renewable and low carbon gases. The operators should engage a digitalization of their networks and
operations to adapt them to the green transformation with the costs taken into account by the NRA,
especially for smart meters.
Regulation of dedicated hydrogen infrastructure
In general, the upcoming
Gas and Hydrogen Decarbonization Package should
take into account the
different phases of the development of renewable and low-carbon gases and the corresponding
infrastructure requirements for each phase. The need for regulation might differ depending on the stage
of hydrogen development, which is moreover likely to happen at different speeds in different Member
States.
As a rule, we consider that hydrogen networks should be regulated based on the same key principles as
applied to the electricity and gas sector: H2 networks and in particular a H2 backbone should be
developed and operated by TSOs/DSOs, which are unbundled from production and supply activities (OU
or ITO, which is a pertinent model as well) and have to grant non-discriminatory access to third parties.
The conversion of existing gas pipelines to transport hydrogen can be a relatively low-cost option in some
countries, to be complemented by the construction of new dedicated pipelines where needed. In any case,
the use of existing gas assets by adapting them to transport and distribute renewable and low-carbon
gases should be foreseen wherever it makes sense instead of decommissioning them, thus preserving in
consequence the financial and human resources involved. Gas TSOs/DSOs own existing gas pipelines and
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have the necessary expertise in network planning and operation. They should clearly be allowed to build,
own and operate H2 infrastructure.
However, there is still great uncertainty on how hydrogen production, future consumption patterns and
transport needs will develop. Therefore,
the approach to regulation should provide predictability to al
relevant parties but also remain flexible, for instance by allowing national regulators to provide for
exemptions.
When it comes to smal er, “point-to-point pipelines” (direct pipelines/industrial pipelines), national
regulators should closely monitor the development of hydrogen markets and infrastructures. In case of
behaviour constituting an abuse of a dominant position, regulation should kick-in and Third Party Access
should be enabled. This should basical y apply to both existing and new B2B pipelines. At the same time,
principles/guidelines should be fixed on European level to give visibility to all relevant parties about when
and in which form regulation will apply and secure investments from the market.
Ownership and operation of P2G assets
The investment and management of P2G assets should be a market activity and open to competition
among market players. Regulated parties such as TSOs/DSOs should as a rule be precluded from such
activities. The
Gas and Hydrogen Decarbonization Package should include equivalent provision as the
Electricity Directive. TSOs/DSOs should be allowed to engage in P2G activities only as a last resort, if it is
established that the market failed to bring forth the needed investments despite appropriate incentives,
financial support and information.
Imports of renewable and low-carbon gases from third countries
The
Gas and Hydrogen Decarbonization Package should
also take into account future imports of
renewable and low-carbon gases. Some countries have already clearly signaled their intentions in this
regard. Transparent certification of imports will be needed, with a system of “international GOs”. Since
hydrogen will be traded between regions, it is necessary to develop as soon as possible international
standards. This system should be initiated by the EU, which is the most advanced region in terms of
initiatives relating to hydrogen (see Certifhy project on H2 GO). It should also be applied to hydrogen
derivatives such as ammonia.
European LNG terminals are already ready to import bioLNG ou liquid e-methane and/or could be
repurposed to accommodate renewable and low-carbon hydrogen from abroad.
Integrated infrastructure planning
As Europe is striving for an energy system that is more integrated at all levels, more decentralized and
complemented by imports, notably of renewable and low-carbon gases/fuels, full transparency has to be
ensured as well as the neutrality of infrastructure operators. To optimize the whole energy system and
costs for the final user,
infrastructure development should be based on integrated planning across
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energy vectors/commodities while providing transparency on cost, methodology, technical-economic
assumptions and identification of best locations for the future production of new gases.
Moreover, ENGIE considers that the energy planification would greatly benefit from the contribution of
the expertise of the DSOs and SSOs. In this respect,
an EU Gas DSO entity should be set up and, together
with SSOs, cooperate with the ENTSOs and support the work of the EU Commission on energy system
integration and implementation of new regulations.
In order to ensure a better coordinated network planning including electricity, gas, hydrogen networks
and storage, an
assessment of flexibility options across sectors from a system perspective should be
required to demonstrate optimized system planning. Indicators such as emissions savings, integration of
RES-E but also renewable and low-carbon gases, system costs savings, etc. could be created to assess the
sustainability of integrated energy projects.
Last but not least, also the development of infrastructure to transport captured CO2 will have to be tackled
in EU legislation.
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